Rants and raves about the mess of higher education in the United States.

Monday, October 15, 2018

The Predatory Art School

By Professor Doom

It’s no secret
that the for-profit schools are doing the most harm to human beings via student
loans…it’s such common knowledge that they are shedding students quickly, many
have lost half or more of their students or shut down in the last five years.

Corinthian was
raking in over 1.4 billion a year off its 72,000 students even as the Federal
government was shutting it down. It was an utter joke of an institution, but
the accreditor didn’t care because Corinthian “complied” with the criteria.
What are those criteria? Mainly, accrediting only asks the school if it thinks
its doing its job...it’s all self-reported, and Corinthian was only too happy
to say it was satisfied it was doing a great job.

Now if you’re
running a scam school, you’ll need students…students who don’t know what
they’re getting in to. Most schools, for-profit and community colleges
especially, focus on “first generation” students for just this reason, but the
for-profits found an even better market to target: art students.

The whole “left
brain/right brain” stereotypes might not be always true, but there’s absolutely
a grain of truth there, particularly with the idea that “artsy” people generally
aren’t the best “numbers” people.

If they don’t
know about numbers, then they’re particularly vulnerable to loan predation, as
they simply aren’t going to understand that it’s fiscally suicidal to get a
$100,000 loan for a degree leading to a job paying $10,000 a year.

And so art students
were sucked into art schools, drained of their loan money, and spit back out on
the street. Am I exaggerating?

Please understand
that even if these loans were for complete rip-off education, even if the
school knows the degrees are worthless…the students are still on the hook, as
these loans are secured with the brutal force of the federal government (which
still took over 2 years to decide the victims of Corinthian shouldn’t still be
in debt, incidentally).

Under
President Barack Obama, the Department of Education had cracked down on
for-profit schools, but President Donald Trump’s administration appears to have
eased the pressure on such institutions considerably.

I do wish the
article had cited this assertion—Trump gets accused of many wrong things
inaccurately. That said, I suppose it’s possibly true, although with so many of
these schools already shut down, I’d rather expect there’d be less shutting
down of schools.

Students are
calling on the Department of Education to enforce an Obama-era regulation that would erase debts accrued at
predatory schools of higher learning, according to CNBC. The Art Institutes’ financial aid
offices, students say, would routinely call students to inform them that their
student loans had run out and pressure them to take on more debt. The bill for
a two-year associate’s degree could run as much as $90,000 and leave students
with little to show for it, according to some alumni.

Wow, you just know
those art students had no idea that $45,000 a year in tuition, and only for a 2
year degree, was ridiculous. There
are rules to erase student debt, incidentally, but they’re pretty draconian, something
like 1 student in 280 actually qualifies (I’ll document this in a later post).

The article puts
much effort into blaming Trump for all this, and while he’s certainly not
fixing the problem…the $1.5 trillion dollar student loan debt didn’t happen
overnight, or even since Trump was elected.

…the Obama Administration to discharge severely
disabled veterans’ student loans, but they were set aside due to complicating
tax laws that would have required those with erased student loan debt to have
to pay tax on it. The cancelled debt was considered to be taxable income.

--Wait, Obama wasn’t like,
the head of the government? He had no influence over law enforcement (hi
executive order)? For what it’s worth,Trump is trying to make it easier for
Disabled Veterans to escape debt, but it’s not much of an issue--About
half of them are in default.
The government may as well write those off anyway.

Back to our main
article:

On the I am AI Facebook group page, some students claim that high interest rates have
doubled the principal of their loans. “I have two loans totaling 13k with
interest rates of nearly 9 percent and 11 percent,” wrote Sam Kotowski, asking
for advice about refinancing private loans. “I have paid these fully since 2012
and, while it hasn’t grown, the total balance has only decreased about $300
when I have paid about 14k on them.

Artsy people
really aren’t the best with money, eh? Not only were they being charged about
four times as much as your typical rip-off school, they were paying double the
usual interest on the loans. Insult to injury, the payments were set up so a
student could make regular payments essentially forever. In the above example,
the student will, assuming he makes regular payments, be free from debt in
about 40 years. Whew, good thing he’s only $13,000 in debt, the ones with more
like $90,000 in debt will be paying for over 250 years. You really can’t expect
art people to make such calculations.

So, these art
schools, having looted with abandon for years, will close down and ride into
the sunset with immense profits. At least the scam ends, right? I mean, we all
now know to avoid for-profit schools. Hmm, wonder what will happen with those old
campuses…

Early last
year, Dream Center Education Holdings, part of faith-based Los Angeles
charity the Dream Center, purchased the 31 Art Institute schools, as well as
the Argosy University and South University schools, from Education Management
for $60 million.

Dream Center moved to
convert the schools into nonprofits. (The approval from the Department of
Education is still pending.)

Now, “nonprofit” sounds
better, but it’s really just a bit of accounting legerdemain, I assure the
gentle reader a non-profit can be every bit as predatory as any for-profit, as NYU
readily demonstrates.

I really to point
out the key detail here: the only reason the for-profits are now widely known
as frauds is because our Federal government stopped trusting accreditation and
decided to look with their own eyes. As the for-profits scuttle off into the
darkness, we’ll see non-profits as scam schools just as soon as the government
decides to take a look there.

I assure the
gentle reader, if the day ever comes when our government realizes the
accreditors for for-profit schools are the same as for our state schools, and
decides to look at what’s happening in state schools, especially community
colleges, they’ll see fraud even more epic than in the for-profits.